Increased borrowing typically means that consumers are feeling more confident.
Americans stepped up their borrowing by $19.6 billion in May compared with April, the Federal Reserve said Monday in its monthly report on consumer credit. That was the biggest jump since a $19.9 billion rise in May 2012.
Total borrowing reached a record $2.84 trillion.
The category that includes credit card use rose $6.6 billion, also the largest gain in a year. Credit card debt reached $847.1 billion, the most since September 2010. Credit card debt remains about 16 percent below its high of $1.02 trillion in July 2008 — just before the financial crisis erupted.
Borrowing for autos and student loans rose $13 billion in May. That was the sharpest increase since February. This category of borrowing has been rising especially fast, driven by loans to pay for college.
The Federal Reserve’s consumer credit report does not separate student loans from auto loans. But data from the Federal Reserve Bank of New York show that student loan debt has been the biggest driver of borrowing since the Great Recession officially ended. In part, that’s because some unemployed Americans have returned to school for training in hopes of landing a job.
More credit card borrowing could help boost consumer spending, which accounts for 70 percent of economic activity. But some consumers have been hesitant to run up high-interest debt since the recession ended. Some economists say many Americans remain cautious because higher Social Security taxes this year have reduced paychecks for most.
Despite the jump in credit card debt in May, consumers aren’t likely to increase their card use to pre-recession levels, said Cooper Howes, an economist at Barclays Research. Credit card debt is known as revolving credit.
“We expect the trends of student loan-driven expansion ... and only small changes in revolving credit to continue in coming months,” Howes said.
The measure of card debt in the Fed’s report has risen $15.8 billion this year. That compares with annual increases of $25 billion to $50 billion in credit card debt before the Great Recession, which officially began in December 2007 and ended in June 2009.
Rising home prices and steady job growth have helped offset any damage to the U.S. economy from the higher Social Security tax.
Employers added 195,000 jobs in June and many more in April and May than previously thought, the government said Friday. Pay was also up sharply. Over the past 12 months, pay has risen 2.2 percent while consumer prices have increased 1.4 percent.
Consumers boosted their spending from January through March but reduced the pace of their savings to finance it. After-tax income dropped in the first quarter.
That decline reflected, in part, the increased Social Security tax that took effect Jan. 1. A person earning $50,000 a year has about $1,000 less to spend this year. A household with two highly paid workers has up to $4,500 less.
The economy grew at an annual rate of only 1.8 percent in the January-March quarter. Many economists have forecast that growth in the April-June quarter will weaken further to around 1.5 percent. But they think the economy will rebound somewhat in the second half of this year as stronger employment growth fuels more consumer spending.
The Federal Reserve’s borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans related to real estate.